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CNBC's Fast Money needs a trader who knows the basics of biotech

Monday, 5-May-2014

Being a stock market junkie, I’ve been a big fan and watcher of CNBC almost my entire life.  In fact, as someone who invests from home for a living, I usually have it on in the background from the time I wake up at 5:00 AM Kansas City time until I close things up for dinner after Jim Cramer finishes his show 6:00 PM local time.  If there was a super-watcher of CNBC, I am probably it.  However, I have to admit that frustration from watching CNBC lately has brought me very close to finally throwing in the towel for good.


The problem lies in the fact that over the last handful of years especially, certain parts of the network’s programming have become so uninformed and unreliable that I feel like watching serves no purpose for knowledgeable investors at all.  Case in point is biotech, a focus of mine.  CNBC devotes two hours of programing, one during lunchtime and one in the afternoon, to a show called Fast Money where traders discuss stock specific news of the day.  Given how it airs on the world’s top financial news channel, you’d think the program would have at least one trader who knows the basics of biotech, but it doesn’t.  Not even close.


A glaring example, which I feel is par for the course, is this Fast Money video clip from Friday.  Please take time to watch it because if you know even the slightest thing about biotech, your jaw will hit the floor over how oblivious the show is to the sector.  In the clip, entitled “This stock is ripe for takeover,” one of the Fast Money/Options Action traders gleans from looking at Vertex Pharmaceuticals (Nasdaq: VRTX) that the company might be in play for M&A given how expensive its options are trading.  He compares the future move the options are forecasting to the way the stock has more narrowly traded around earnings time.


Anyone who knows the basics of biotech can tell you how problematic this analysis is.  The commentator clearly is unaware of the granddaddy of binary events coming up this summer, the result of Vertex’s Traffic/Transport phase III trial in cystic fibrosis.  The trial is so important that it could literally move Vertex nearly $10 billion in either direction depending on how the data looks.  This is not some obscure trial I am picking out either, because most people would agree it is THE biotech event of the year.  It is so big that some argue Vertex could take the whole sector with it whichever way it goes.  For the entire cast of a show on such an important network to be unaware of that, let alone opining with other irrelevant advice, is crazy.  It would be akin to a baseball show devoting a segment to the Yankees’ odds of winning the National League title.  This is not a recipe for holding onto informed viewers for long.


I’ll throw another example out there that, through its sheer ridiculousness, will be seared into biotech investors’ minds for many years to come.  The biggest cancer meeting in the world is hosted by the American Society of Clinical Oncology each May in Chicago.  It is a huge event that attracts physicians, researchers, biotech companies, Wall Street people, and many others who are very serious about the industry.  Though it is not primarily a stock thing, the meeting is make or break for some stocks because companies like to unveil their most important cancer data there when they can.  Even if a biotech investor does not attend personally, you can bet that he or she is very aware of what is going on in Chicago at that time.


Fast Money found a way to make itself infamous at the meeting last year when one of its traders, Jon Najarian (@optionmonster), mentioned on TV that Celsion (Nasdaq: CLSN) was his ASCO stock to watch.  The problem with that prediction, and you barely have to be a biotech person to know this, is that Celsion is not only a very dubious company to begin with, but they had NO presence at that year’s meeting whatsoever.  To stick with a baseball analogy, it would have been akin to predicting the Carolina Mudcats will make a run for the World Series. This literally became the meeting’s running joke.  I saw people toasting it at social events, and heard stories of traders looking in jest for Celsion’s presentation at the poster section like something out of Where’s Waldo.  As funny as it sounds, it is a big deal when CNBC casts itself in that kind of light in front of the experts of an entire industry.


The bottom line is that it matters how biotech stocks are discussed on TV.  Take as another example what happened to Aegerion (Nasdaq: AEGR) after its CEO Marc Beer appeared on Fast Money on October 31st last year.  The discussion of that company’s drug was so flippant that even the FDA stepped in and asked Aegerion to issue a formal clarification to potential patients.  The stock was trading for $82 the night he was on the program, and has since been cut in half.  While Mr. Beer is a professional and should have been way more careful about how he talked about his drug on TV, one cannot help but wonder if things would have gone differently if the interview had been conducted from a more technical angle (half the discussion was about the Red Sox–Cardinals World Series).  Why would a CEO from the sector risk going on the show if they can’t necessarily expect a well-informed discussion?


In my opinion, Fast Money has a lot of catching up to do if they want to be taken seriously when it comes to biotech. There should be at least one full-time trader on the program who knows the basics of the sector and can speak intelligently about it when news arises.  Keep in mind a couple of things that make biotech unique.  First, it is a very fundamentally driven and complex sector.  Not just any trader can look at a chart or options table and give professional advice about how to invest in biotech stocks.  That makes it very important to have someone with the experience to be able to know what is going on.  Second, biotech has been the stock market’s hottest sector for years, so it deserves a high level of attention.  In fact, healthcare as a whole now represents nearly 20% of our country’s GDP.  Given both its outperformance and relevance to the overall economy, it is unacceptable not to have one trader who can talk about biotech at a granular level in an informed and educated way.


Before concluding, I would be remiss if I didn’t give CNBC as a broader network a lot of credit for a FANTASTIC new hire they made this month by bringing Meg Tirrell on as their lead biotech and pharma reporter.  That position had sat vacant since 2010 (I kid you not) and she has already been a huge breath of fresh air for people who follow the sector.  It has been great to learn from her reporting.  That was one missing piece the network was smart enough to fill, so I would recommend shoring up biotech talent on Fast Money as the next.  Given how the show is on twice a day for an hour each, I think it definitely deserves someone there full-time (or a full-time rotation of talent).


As I said, I have been a life-long CNBC fan and really want to see them succeed to the fullest.  The network still has a lot going for it, but when it comes to biotech specifically, there is a ton of room for improvement.  If CNBC expects viewers like me to stick around for long, hopefully they will consider fixing this quickly.

Who Am I?
Brad Loncar

I'm an individual investor from Kansas City.  My focus is on biotech stocks, but I enjoy investing in all industries. I'm an old-school, buy and hold investor who believes the best way to outperform and grow capital is to own innovative companies with good management teams over the long-term. more>>

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